::Barloworld ::Vehicle finance
Vehicle finance takes several forms, like the instalment sale, the lease agreement and the true rental agreement. Each has its own advantages and disadvantages and a prospective buyer needs to be aware of these in order to make an informed decision which to choose.
It is not always wise to allow the selling dealership to arrange finance for you. Remember, they want very dearly to sell you a car and unscrupulous types can spot a buyer that has not done his homework a mile away. They might just want to get you to drive off with the lowest possible instalment and a smile on your face. But it could cost you later.
One way of lowering the instalment is by introducing a residual, or balloon payment. This residual has to be paid at the end of the agreement. The effect of the balloon payment is that you are paying off a smaller part of the price; this means lower instalments. It also means that you are paying more money in the end, because you are charged more interest. Also, remember that there is a risk that the market value of the car at the end of the agreement is less than the outstanding balloon payment. This means that, if you want to sell the car, the selling price might not be enough to cover the outstanding loan. Be wary of the residual!
If you are going to replace your car at regular intervals, rather consider a lease agreement as your method of vehicle finance. It is flexible, because you can give the car back at the end of the agreement or you can opt to keep it, once all payments have been made in full.
The instalment sale remains the best option if you intend to keep the car or if you make use of a car allowance. The repayment period and deposit can be structured to best suit the buyer’s needs. The shorter the period, the lower the interest paid, but the instalment will be bigger.
Vehicle finance need not present you with a nasty surprise, three years down the line, if you had made and informed decision. Always do the homework first. If you're still uncertain on which way to go with your vehicle finance or even car insurance please feel free to fill out the form below and we'll come back to you!
